Industrial real estate market recovers strongly

New potential and trends

The Indochina Kajima Development Company, a joint venture between Indochina Capital and Kajima Corporation, recently launched an industrial real estate investment and development platform focused on the nationwide roll out of factory and warehouse properties for lease throughout the country’s key manufacturing and logistics markets. The Core5 Vietnam platform (www.c5ip.vn) plans to offer industrial assets of some US$1 billion in the next 5-7 years.

Germany’s Framas Group has rented a ready-made factory area of ​​20,000 square meters in the KTG Industrial Nhon Trach 2 project (Dong Nai Province). Framas specializes in the production of high-quality plastic parts for customers such as Nike and Adidas.

According to Fabian Urban, Head of Footwear Technology at Framas Vietnam, Vietnam was chosen as a factory site because of its superior facilities compared to other locations. The establishment of the new factory is part of the group’s strategy to develop the footwear sector in Vietnam, he said.

Industrial real estate projects have attracted a large number of domestic and foreign investors to Vietnam’s 260 industrial parks and 75 planned industrial zones, as well as to the southern and northern key economic zones.

Industrial real estate projects attract many domestic and foreign investors

Vietnam’s advantage lies in its lower industrial real estate prices compared with many other countries in the region, the country’s political stability, competitive labor costs and government incentives.

Cushman & Wakefield Vietnam reported recently that the northern region has about 10,000 hectares of industrial land in five key provinces/cities, including the capital Hanoi, Hai Phong City, and Bac Ninh, Vinh Phuc and Hung Yen provinces.

Trang Bui, General Director of Cushman & Wakefield Vietnam, said northern Vietnam remains the first choice for many investors. Although they started developing later than the southern industrial market, the northern industrial provinces offer advantages for high-tech industries as reflected in the average 80 percent occupancy rate of their industrial land in five key provinces and cities.

Logistics market promise

She said new foreign direct investment (FDI) in Vietnam’s industrial parks in 2022 is focused in manufacturing and auxiliary logistics industries, i.e., industrial real estate that supports production and logistics. Vietnam’s logistics market is still in the early stages of development but has great potential for growth in the next 5-10 years with stepped up government infrastructure projects, she added. In addition, the strong growth of the middle class with high disposable income and the strong spread of e-commerce will also drive the development of the logistics market.

Deputy Minister of Planning and Investment Tran Duy Dong said the pandemic disrupted supply chains and goods circulation, and delayed projects’ implementation, causing companies, multinational corporations and countries to reconsider their business strategies and change investment attraction policies. Nonetheless, Vietnam remains an attractive FDI destination, luring growing investment from Asia, Europe, the US, and ASEAN (the Association of Southeast Asian Nations).

Economists pointed out problems that hinder the industrial real estate market’s development, including weak infrastructure connectivity between localities; increasing logistics costs due to the lack of warehouses, cargo ships and containers; the lack of specific environmental and eco-industrial park criteria, incentive policies and professional environmental, social and governance (ESG) criteria; and labor shortages in the post-pandemic period.

Experts at the Vietnam Industrial Real Estate Forum 2022 held in May assessed that FDI has been booming in the past five months since Vietnam returned to the “new normal” by bringing COVID-19 under control, opening up many opportunities for industrial capital.